Rules on Basis of Interests in Charitable Trusts on Horizon, Official Says

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The next estate and trust project out of the gate for the Treasury Department will be final rules on basis of interests in charitable remainder trusts under tax code Section 1014, Catherine Hughes, Treasury estate and gift tax attorney-adviser, said.

In proposed rules (REG-154890-03) issued in January, the Internal Revenue Service said that the basis in these cases will be reduced by the portion of the sum of the undistributed amount of net ordinary income described in Section 664(b)(1) and the amount of undistributed net capital gain described in Section 664(b)(2) (12 DTR G-1, 1/17/14).

The IRS and Treasury have become aware of transactions in which sale or other disposition of all interests in a CRT subsequent to the contribution of appreciated assets to and their reinvestment by, the CRT results in the grantor or taxable beneficiary receiving the value of the beneficiary's trust interest while claiming to recognize little or no gain. Some of the transactions have been designated transactions of interest to the government.